3 chapter three - designing a telecoms regulatory framework for converged mobile financial services in kenya

Email: jeremmy@mwagambo-okonjo.co.ke
URL: http://www.mwagambo-okonjo.co.ke/our-team/jeremy-okonjo.html

CHAPTER THREE
3.0
DESIGNING
A
TELECOMS
REGULATORY
FRAMEWORK
FOR
CONVERGENCE IN MOBILE TELECOMS AND FINANCIAL SERVICES IN KENYA

3.1

Introduction

In Chapter 2, I discussed the impact of the convergence of mobile and financial services, in the
form of mobile financial services, on regulation of mobile telecoms in Kenya. The discussion
concluded that the telecoms regulatory framework in Kenya has been reformed to respond to
convergence within the ICT sector.472 However, this has not been sufficient to meet the
challenges of cross-sectoral convergence, for example, with the financial services sector. 473 The
result is that the emergence of mobile financial services in Kenya has led to many regulatory
problems, including regulatory overlap, regulatory inertia, and regulatory arbitrage.474

In this Chapter, I draw from the findings in Chapter 2 to answer the research question three. I
explore possible regulatory frameworks that will promote innovation and quality of service in
convergence of mobile and financial services in Kenya. The study is based on the hypothesis that
regulation of inter-sectoral converged services such as mobile financial services by telecoms
regulators can be achieved by the adoption of principle-based regulation over rule-based
regulation.

However, while the discussion is focused on an ideal regulatory framework for mobile financial
services, I note that, as argued by Robert Frieden (2002) frameworks for regulation of
convergence should be open and general.475 Nevertheless, there are some regulatory frameworks

472

See section 2.3 on authorization and licensing of mobile telecoms business. The introduction of Unified
Licensing Framework (ULF) by the Communications Commission of Kenya is perhaps the most significant
regulatory response to convergence.
473
Ibid. Definitions of telecommunications services under Section 2 of the Kenya Information and Communications
Act and the Kenya Information and Communications Regulations, 2009, are ambivalent as to whether mobile
financial services are Value Added services or telecommunications services, or neither.
474
I have discussed regulatory inertia, overlap and arbitrage under section 2.8 of Chapter 2. For an in-depth
discussion, see United Nations Conference on Trade and Development (2012) “Mobile Money for Business
Development in the East African Community: a comparative study of existing platforms and regulations’, op. cit.
475
Robert M Frieden (2002) “Wither Convergence: Legal, Regulatory, and Trade Opportunism in
Telecommunications,”18 Santa Clara Computer & High Tech. L.J. 171. I discuss this issue in detail in section 3.3.5
below.

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that can be specific to specific types of convergence.476 Hence the regulatory frameworks
proposed are both specific to mobile financial services, but also general to other types of
convergence, for example, within the ICT sector.
3.2

The regulatory framework for the telecommunications sector in Kenya.

The primary laws and policies that regulate the telecommunications sector in Kenya include:
(a) The Constitution of Kenya 2010;477
(b) The Kenya Information and Communications Act;478
(c) The State Corporations Act;479 and
(d) Ministry

of

Information

and

Communication’s

National

Information

and

Communications Technology (ICT) Policy of 2006;480

In 1998, the enactment of the Kenya Communications Act of 1998 broke up the Kenya Posts and
Telecommunications Corporation (KPTC), the long-time legacy ICT regulator in Kenya.481 It
liberalized the telecommunications sector in Kenya and, and vested various regulatory
responsibilities on a number of institutions:482
(a) The Communications Commission of Kenya (Communications Commission of Kenya);
(b) The Communications Appeals Tribunal (CAT);
(c) The National Communications Secretariat (NCS);

Kenneth Jull and Stephen Schmidt (2009) “Preventing Harm in Telecommunications Regulation: a new matrix of
principles and rules within the ex ante vs. ex post debate” Vol. 47,Canadian Business Law Journal, pp. 329-362. See
the discussion in section 3.3.5 below.
477
The Constitution of Kenya 2010 was promulgated and came into force on the 27 th August 2010. The
constitutional framework has thoroughly transformed the architecture of governance, from both a normative and
institutional perspective. See Ben Sihanya (2011) “The Presidency and Public Authority in Kenya’s New
Constitutional Order,” Constitution Working Paper Series No. 2, Society for International Development (SID)
Nairobi.
478
, Cap. 411A, Laws of Kenya.
479
, Cap. 446, Laws of Kenya.
480
Gazette Notice No. 24 of 2006.
481
Institute of Economic Affairs (2002) “Telecommunications Policy in Transition: mainstreaming Kenya into the
global information economy,”op. cit.
482
The Communications Commission of Kenya, the Communications Appeals Tribunal and the National
Communications Secretariat are created by the Kenya Information and Communications Act. The office of the
Minister/Cabinet Secretary has usually been created under the Constitution. Its roles are then defined by the
Presidential Circular on Re-organization of Government, while its powers are then vested by Act. The judiciary is
established by the Constitution, while the details of its mandate are found in various statutes, including the Law
Reform Act, Cap. 26, and the Kenya Information and Communications Act. The KICA further contains and spells
out the judiciary’s role with regard to ICT. Comments by Ben Sihanya in the course of supervision.
476

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(d) The Cabinet Secretary for Information and Communication;483
(e) The judiciary.

The Constitution of Kenya 2010 provides guidelines for exercise of state regulatory functions by
the above-mentioned bodies. These include requirements for consultation and participation of
stakeholders in the regulatory process.484 To that extent, other regulatory institutions in the
telecommunications sector include market players and lobby groups. These include the
Telecommunications Service Providers Association of Kenya (TESPOK) and the Kenya
Telecom Network Operators (KTNO), and the Telecommunications Network Operator Forum
(TNOF).485

They also include consumer lobby groups and civil society, including the Consumer Federation
of Kenya (COFEK).486 Articles 22 and 258 of the Constitution have provided a gateway for
public interest litigation by consumer protection groups, aimed at enforcement of the Bill of
Rights, and the entire Constitution, respectively.487

Under the Constitution of Kenya 2010, regulators such as the Communications Commission of
Kenya (CCK) and the Cabinet Secretary for ICT are also answerable to certain Senate, National
Assembly, and joint Parliamentary Committees whose terms of reference include
Communications.488 These include the Parliamentary Committee on Energy, Communication and
Information, and the Parliamentary Committee on Delegated Legislation.489 These committees
also directly investigate market players in which government has a stake, such as Telkom

483

The office of Cabinet Secretary, up until the promulgation of the Constitution of Kenya 2010, has been referred
to as the office of Minister.
484
See the national principles and values of governance under Article 10 of the Constitution of Kenya. See also,
Federation of Women Lawyers Kenya (FIDA-K) & 5 others v Attorney General & another [2011] eKLR.
485
See Lishan Adam, Tina James and Alice MunyuaWanjira (2007) “Frequently Asked Questions about MultiStakeholder Partnerships in ICT for Development: a guide for national ICT policy animators,” the Association for
Progressive Communications (APC) South Africa.
486
Ibid.
487
The Courts have recognized and legitimized this right in Consumer Federation of Kenya (COFEK) V Attorney
General & 4 Others [2012]eKLR.
488
See Article 124 of the Constitution, which gives Parliament the powers to establish Parliamentary committees.
489
Republic of Kenya (2008) National Assembly Standing Orders, Government Printer, Nairobi. Standing Order
number 216 establishes departmental committees, while the Second Schedule to the Standing Orders lists the
committees and their terms of reference.

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Kenya.490 For example, recently, the Parliamentary committees summoned the ICT Minister and
the CCK to shed light on award of a tender for distribution of digita broadcasting signals in
Kenya.491

I discuss each of the regulatory institutions above, and the extent to which they are constituted to
regulate and promote convergence in mobile and financial services in Kenya.
3.3

The Communications Commission of Kenya

The Communications Commission of Kenya is established under section 3 of the Kenya
Information and Communications Act (KICA).492 Under section 5 of the Act, the Commission is
mandated to promote, develop and regulate information and communication services in
accordance with the provisions of the Act. The Communications Commission of Kenya is
therefore the primary regulator for the telecommunications sector in Kenya. In this role, as shall
be explored below, the Communications Commission of Kenya is the central platform through
which the activities of other key regulatory players outlined above can be integrated and
coordinated.493

The role of the Communications Commission of Kenya in the new constitutional dispensation
has been challenged in the courts by the Media Owners Association, an industry lobby group.
This is because the Communications Commission of Kenya has not been restructured in line with
Article 34(5) of the Constitution. This constitutional provision requires Parliament to enact
legislation that provides for the establishment of a body which shall be independent of control of
government, political interests, and commercial interests. It must also reflect the interests of all
sections of the society.494 However, as at August 2013, the courts had yet to determine the case,

Daily Nation (2013) “Telkom officials grilled over firm’s performance,” Daily Nation (Nairobi) Monday June
25, 2013. The Parliamentary committees took Michael Ghossein the Telcom Kenya CEO, to task over the
company’s continued dismal performance despite its privatization six years ago.
491
Daily Nation (2011) “MPs to block award of broadcast tender,” Daily Nation (Nairobi) Wednesday July 20, 2011.
492
Cap. 411A, Laws of Kenya.
493
I briefly compare the juridical and institutional establishment of the CCK with the UK’s Office of
Communications (OFCOM) and the US Federal Communications Commission (FCC). See section 3.3.1.8 below.
See also, Constantijn Van Oranje, et al (2008) “Responding to Convergence: different approaches for telecoms
regulators,” RAND Europe, Brussels, Belgium for an in-depth examination of UK and US responses to
convergence, generally. There is need for deeper comparative research in this area.
494
Media Owners Association v Attorney General, the Ministry of Information and Communication and the
Communication Commission of Kenya, Petition No. 244 of 2011.
490

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as it had not been set for a full hearing. I discuss the issue of independence in section 3.3.2.1
below.

In addition, stakeholders in the broadcasting sector, including the Royal Media Services, have
also challenged the constitutionality of the power of the Communications Commission of Kenya
to license market players.495

I use a six-pronged framework to analyze the extent to which the Communications Commission
of Kenya is institutionally structured to respond to the challenges of convergence in mobile and
financial services. The five key benchmarks are:
(a) Regulatory philosophy of the CCK;
(b) Institutional or board composition of the CCK;
(c) Regulatory cooperation between the CCK and other regulators;
(d) Extent of state regulation, co-regulation and self-regulation within CCK’s regulatory
framework;
(e) Use of principle-based versus rule-based legislation by the CCK in its legislative
mandate.
3.3.1 CCK’s Regulatory philosophy in the era of convergence
The institutional perspective of the Communications Commission of Kenya (CCK) is integral in
how it interprets its role and terms of reference for regulating telecoms in an era of convergence.
Ben Sihanya (2000) has argued that in formulating regulatory practices, four questions are
pertinent.496 First, what is the subject matter of regulation? Second, why is regulation necessary?
Third, how will the regulation be carried out? Fourth, who will regulate? These questions have
been important to telecoms and other sectoral regulators in Kenya, with the advent of
liberalization of utility sectors and privatization of state corporations.497

495

Royal Media Services Ltd v Attorney General & 2 others [2013] eKLR.
Ben Sihanya (2000) “Infotainment and Cyber Law in Africa: regulatory benchmarks for the third
Millennium,”op. cit.
497
Institute of Economic Affairs (2002) “Telecommunications Policy in Transition: mainstreaming Kenya into the
global information economy,”op. cit.
496

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Since 1983, when Christopher Hood first suggested that “regulatory activities of the state involve
far more than legislating or rule making”, the definition of regulation has evolved.498 There is
consensus among lawyers, economists, political scientists and analysts such as the Kenyan
chapter of the Institute of Economic Affairs (IEA) that the scope of regulatory activity has since
expanded from regulatory authority to sector leadership.499
This sector leadership entails the processes of “developing, agreeing, setting, evolving and
enforcing rules of conduct and engagement.”500 In addition, regulation entails the processes of
“standard-setting, information gathering and monitoring, and behavior modification.”501 As
discussed in detail further below, the CCK has exhibited this progressive view of its regulatory
role by, for example, investing in research and development.502

The role of telecoms regulators in Kenya and globally has further been complicated by
convergence within the ICT sector and between the ICT and other sectors such as financial
services. As discussed in Chapter 1 above, convergence and other developments in the ICT
sector have set the Kenyan economy towards an information society.503
In this context, what is the Communications Commission of Kenya’s understanding of its role in
regulating telecoms? Its perspective can be drawn from five main regulatory and policy
instruments that outline its mandate. These include: the Kenya Information and Communications
Act; the Communications Commission of Kenya Strategic Plan, 2008-2013; the State
Corporations Act; the National Information and Communications Technology (ICT) Policy,
2006; and the National Information and Communications Technology Sector Master Plan, 2008-

498

Christopher Hood (1983) The Tools of Government, Macmillan, London, pp. 46-85.
Institute of Economic Affairs (2003) “The Quest for an Information Society: benchmarking the regulatory
framework to usher Kenya into an information era,” Institute of Economic Affairs, Nairobi.
500
Ibid. The author advocates a more pro-active and leadership-driven style for telecoms regulators. I explore this
further below. See also, John Buckley (2003) Telecommunications Regulation, op. cit.
501
Morgan Bronwen &Yeung Karen (2007) Introduction to Law and Regulation, Cambridge University Press,
Cambridge, New York.
502
See Section 23(2)(b) of the Kenya Information and Communications Act. See also, Communications
Commission of Kenya, (2013) Annual report financial year 2011/12, Nairobi.
503
See section 1.2.1 of Chapter 1. See also, Timothy Waema, et al (2010) Kenya ICT Sector Performance Review
2009/2010: Towards Evidence-based ICT Policy and Regulation,op. cit.
499

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2012. I discuss their respective contents below. The chronology of the statutory and policy
instruments below does not have any significance.
3.3.1.1 Kenya Information and Communications Act504
Section 5 of the Act provides the object of the Commission as to license and regulate postal,
information and communication services in accordance with the provisions of the Act. 505 Aside
from designating the Communications Commission of Kenya as a converged sectoral regulator,
the Act does not provide a framework for inter-sectoral regulation of, for example, of mobile
financial services.

As argued in this study, the ambivalence of the statutory framework has resulted in regulatory
inertia on the part of CCK.506 The regulator has ceded its primary regulatory role over mobile
financial services to the Central Bank of Kenya. This is exhibited by formulation and enactment
of laws and regulations relating to mobile money payments, administered by the Central Bank of
Kenya and the National Treasury. These include the National Payments System Act 507 and the
Central Bank of Kenya Draft Regulations for the Provision of Electronic Retail Transfers.508

Njaramba Gichuki (2013) has argued, however, that the Central Bank of Kenya has rightly
claimed its regulatory mandate over mobile financial services, from sections 4 and 7 of the
Central Bank of Kenya Act.509

Another integral provision in this context is Section 83C of the Kenya Information and
Communications Act, which provides for one of the functions of the Communications
Commission of Kenya as the facilitation of electronic transactions. The architecture of mobile
504

See the findings of the High Court in Royal Media Services Ltd v Attorney General & 2 others [2013]
eKLR,.regarding the regulatory mandate of the Communications Commission of Kenya.
506
See section 2.8 in Chapter 2, on the impact of the convergence of mobile and financial services on regulation of
mobile telecoms in Kenya.
507
Cap. 39, Laws of Kenya.
508
Central Bank of Kenya Draft Regulations for the Provision of Electronic Retail Transfers, at
http://www.centralbank.go.ke/downloads/nps/Electronic%20%20Retail%20and%20E-regulations.pdf (accessed on
27/8/12). I have discussed these regulations under Section 2.7 in Chapter 2.
509
Njaramba Gichuki (2013) Law of Financial Institutions in Kenya, op. cit. Section 4(2) of the Central Bank of
Kenya Act, Cap. 491, Laws of Kenya, provides that the regulatory role of the CBK is to ensure liquidity, solvency
and proper functioning of a stable, market-based financial system.
505

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financial service systems, as discussed in Section 1.2.3.1(b) of Chapter 1, indicates that these
services are essentially electronic transactions.510 The provisions of Section 83C of the Act
would ideally position the CCK as the primary regulator of any converged services that are
electronic in nature, including mobile financial services. However, as discussed above, the
Commission has not interpreted this provision broadly enough to reclaim the primary regulatory
mandate over mobile payment services from the Central Bank of Kenya.
On 11th July 2013, the Information and Communications Cabinet Secretary, Dr. Fred Matiangi,
published the Kenya Information and Communications (Amendment) Bill, 2013.511 The Bill
seeks to amend the definition of telecommunications service to refer to “any transaction,
including banking, money transfer, or similar services carried out through a communications
system.”512 The aim of the amendment, according to Dr. Matiang’i, is to, among other objectives,
“enable better regulation of the sector by providing for the handling of new regulatory challenges
in the communications sector due to rapid technological challenges”.513 In addition, the
amendments seek to bring mobile money and online banking under the ambit of the CCK.514

The proposed amendments indicate a positive shift in the regulatory philosophy of the CCK and
the Cabinet Secretary for ICT, with regard to the over-arching role of ICT regulators. In a policy
justification paper for the amendment, the CCK has stated that the changes will introduce the
wider concept of communication and give it more power to discharge its regulatory function, as
guided by constitutional and operational principles.515

Consultative Group to Assist the Poor (2007) “Notes on Regulation of Branchless Banking in Kenya,”op. cit.
See the Kenya Information and Communications (Amendment) Bill, 2013, published on 11 th July 2013, at
http://www.cickenya.org/index.php/legislation/item/332-the-kenya-information-and-communications-amendmentbill-2013#.Uh8V8T-NBs4 (accessed on 28/8/13).
512
It seeks to amend Section 23 of the Kenya Information and Communications Act, which section provides the
detailed regulatory mandate of the Communications Commission of Kenya. See Charles Wokabi (2013) “Bill backs
CCK on mobile cash deals,” Daily Nation (Nairobi) Tuesday July 9, 2013.
513
Nation Media Group (2013) “Bill denies politicians broadcast license,” Daily Nation (Nairobi) Thursday July 4,
2013.
514
Ibid.
515
Charles Wokabi (2013) “Bill backs CCK on mobile cash deals,”op. cit. See also, William H. Melody’s
methodology below. See William H. Melody (1997) “Designing a Working Telecom Regulatory Structure for 21 st
Century Information Societies,”op cit. The author advocates for a wider interpretation of the concept of
“communications” by ICT regulators.
510
511

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In addition, the Central Bank of Kenya, which has been the primary mobile financial service
regulator, has also moved towards this new regulatory philosophy.516 In response to the
amendment, it has indicated that there is a consensus that mobile money be regulated by both
institutions.517 This is especially because it is a value-added service offered by the licensees of
CCK but which deals with financial transactions.518
3.3.1.2 The Communications Commission of Kenya Strategic Plan, 2008 – 2013519
In this plan, guided by the Kenya Vision 2030, the Commission sets out its mission as “to
facilitate access to communications services through enabling regulation and catalyze the
country’s socio-economic development”. The Strategic Plan barely addresses convergence, other
than by providing that the Commission shall reform its regulations and policies to meet the
challenges of convergence.

In 2012, the CCK revised the Strategic Plan to align it with the Constitution of Kenya 2010, and
the Government of Kenya Vision 2030.520
3.3.1.3 The State Corporations Act 521
The State Corporations Act was enacted to make provision for the establishment, control and
regulation of state corporations in Kenya. With respect to the operation of ICT regulators, this
Act must be read alongside the Kenya Information and Communications Act (KICA), which
takes precedence. This is because the KICA is a specialized Act of Parliament, and is also the
latter enactment.522

516

See Section 1.2.4.1 of Chapter 1. During the inception of M-PESA the Financial Institutions Supervision
Department (FISD) of the CBK viewed M-PESA as a banking business, its departmental counterpart, the National
Payment System (NPS) Division of the Banking viewed M-PESA as a payment service provider. See Alliance for
Financial Inclusion (2010) “Mobile Financial Services: regulatory approaches to enable access,”op. cit.
517
Charles Wokabi (2013) “Bill backs CCK on mobile cash deals,”op. cit.
518
Ibid.
519
Communications Commission of Kenya (2008) Strategic Plan: 2008-2013, [online] available at
http://www.Communications Commission of Kenya.go.ke/resc/publications/strategic_plan/Strategic_plan_08-13.pdf
(last accessed on 3/9/12).
520
See Communications Commission of Kenya, (2013) Annual report financial year 2011/12, Nairobi.
521
Cap. 446, Laws of Kenya.
522
This principle, also known as the rule of implied exception, is known as generaliaspecialibus non derogant. It
was pronounced in the US Supreme Court case of Rogers v. United States185 U.S. 83 (1902).

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Section 5(1) of the Act provides that every state corporation shall have all the powers necessary
or expedient for the performance of its functions. This section is integral to the legal
interpretation of the extent of the jurisdiction or mandate of the Communications Commission of
Kenya, as a State corporation. Indeed, the wide vesting of “all the powers necessary or expedient
for the performance if its functions” gives the Commission the necessary statutory backing to
flex its regulatory muscle, especially on new and emerging converged services.

In the context of increased judicial challenges to the constitutional and statutory powers of the
CCK, the regulator could fall back on the various judicial pronouncements of the ultra vires rule.

3.3.1.4 The National Information and Communications Technology (ICT) Policy, 2006523
This policy was approved by the cabinet in January 2006 and published in March 2006. It
qualifies as a “policy guidance of a general nature” issued by the Minister for Information and
Communication to the Communications Commission of Kenya under section 5A(1) of the Kenya
Information and Communications Act.524

The status of the Communications Commission of Kenya as a State Corporation, and the power
of the Minister for Information and Communication to give it policy guidelines has become
controversial by virtue of Article 34(5)(a) of the Constitution of Kenya 2010. It provides that the
media regulator shall be independent of control by Government, political or commercial
interests. This has resulted in calls by industry stakeholders and regulators such as the Media
Council of Kenya calling for the disbandment of the Commission.

The mandate of the Communications Commission of Kenya to regulate has also been called into
question in Court, with some litigants arguing that Article 34(2) of the Constitution disqualifies
any form of State regulation of ICT.525

523

Gazette Notice No. 24 of 2006.
Section 5A(1) of the Kenya Information and Communications Act provides that The Minister may issue to the
Commission policy guidelines of a general nature relating to the provisions of this Act as may be appropriate. The
guidelines shall be in writing and shall be published in the Kenya Gazette.
525
Communications Commission of KenyaCommunications Commission of KenyaSee, for example, Kwacha Group
of Companies & another v Tom Mshindi& 2 others , Civil Suit No. 319 of 2005, in the High Court of Kenya at
Nairobi, [2011] eKLR. However, the Court upheld the power of the State to limit the freedom of speech.
524

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The National ICT Policy acknowledges the inadequacy of the 1998 Kenya Communications Act,
but does not provide any policy guidelines on the role of the Communications Commission of
Kenya in meeting the challenges of convergence.

3.3.1.5 The National Information and Communications Technology Sector Master Plan,
2008-2012526
The National Information and Communications Technology Sector Master Plan 2008-2012
acknowledges the role of the Communications Commission of Kenya as a converged regulator.
However, it does not address the challenges of convergence, or give any guidance to the
Communications Commission of Kenya on its regulatory role in convergence.

As noted above, convergence of telecoms and other ICT and non-ICT services in Kenya has
resulted in the innovation of new converged applications and services such as mobile financial
services, health, education527 and other converged services. In fact, the Communications
Commission of Kenya’s current strategic plan acknowledges thus:
“The Commission’s work is well cut out to create an enabling environment to serve what
appears to be a market full of unlimited opportunities, including the provision of social
services such as education, health and enterprise development.”528
However, to date, there has been little, if any, coordination, of policy development and planning
between telecom and other non-telecom sectors of the economy. For example, UNCTAD (2008)
has noted that telecoms liberalization in the East African Customs Union has not attracted the
anticipated investments from other business sectors. This is because general and specific
business laws and policies in the respective countries, and at the Union level, are not in tandem
with telecoms laws and policies.529
526

Republic of Kenya (2008) National Information and Communications Technology Sector Master Plan 2008-2012,
Government Printer, Nairobi.
527
Patti Swarts and Esther Mwiyeria Wachira (2009) Kenya: ICT in education situation analysis, The Global e
Schools and Communities Initiative (GeSCI) Nairobi.
528
Communications Commission of Kenya (2008) Strategic Plan: 2008-2013, op. cit.
529
United Nations Conference on Trade and Development (2008) Services and Development: implications for the
telecommunications, banking and tourism services sectors in Kenya, op. cit. The authors note that “in spite of
substantial improvement in the legal and regulatory environment in the country, the business environment is not

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What role, therefore, should the Communications Commission of Kenya play in the regulation of
telecoms towards Kenya’s transformation into a knowledge economy? There is a continuum of
views on the role of telecoms regulators in convergence. They can be classified as follows: pure
de-regulation; long-term market regulation; and pro-active regulation.530 I discuss each of them
below.
3.3.1.6 Pure deregulation
This model assigns a very limited role to the Communications Commission of Kenya: the
liberalization of the telecoms industry, and the elimination of regulatory bottlenecks. It envisions
a converged telecoms sector driven by market forces. However, as extensively discussed in
Chapter 2, the Kenyan telecoms and mobile financial services markets are asymmetrical markets
that have in fact been described as unfair playing grounds from the perspective of competition.531

Hence, pure deregulation will undermine competition, quality of service and other common
regulatory benchmarks that benefit consumers.532
3.3.1.7 Long-term market regulation
This regulatory model recognizes the need for regulation of competition alongside market
liberalization. This is especially necessary if the economic and social objectives of the telecoms
sector are to be achieved. Some of the social objectives in Kenya include universal access to
communications facilities.533 For example, in 2012, in the run-up to the 2013 general elections in
Kenya, the Consumer Federation of Kenya (COFEK) sued the Minister for Information and
Communication over the digital migration of broadcasting signals. COFEK argued that the

adequately stable and conducive to stimulate investors to take advantage of the market opportunities ushered in by
liberalization of the telecommunications sector and the wider regional market arising from the East African Customs
Union.”
530
I have adopted William H. Melody’s methodology below. See William H. Melody (1997) “Designing a Working
Telecom Regulatory Structure for 21st Century Information Societies,”op cit.
531
World Bank (2012) Information and Communications for Development 2012: Maximizing Mobile,”op. cit.
532
Ibid.
533
Millennium,”op. cit. the author posits that a major concern in cyberlaw and infotainment is the balancing of
individual rights and the public interest in response to fast developments in technology. This debate has become a
mainstream issue in the convergence of ICT and other sectors.

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policy was inappropriate, unreasonable and expensive to consumers, in comparison to the right
of consumers to access communication facilities, especially in an election period.534

In addition, long-term market regulation encompasses conventional telecoms regulatory elements
such as tariff regulation, universal service and access, regulation of quality of service, licensing
and authorization.535 The regulatory model, however, maintains the narrow traditional focus on
the telecoms service, and not outside of the sector. It is emerging that the Communications
Commission of Kenya, until the formulation and publishing of the Kenya Information and
Communications (Amendment) Bill, 2013, subscribes to this model. This is especially
considering its previously narrow view of its mandate as the facilitation of access to
communications facilities.536

The disadvantage of this regulatory model is that it is essentially reactive.537 As seen from the
review of Kenya’s telecoms regulatory framework of mobile financial services, in Chapter 2, this
regulatory model does not rise to the challenge of inter-sectoral telecoms convergence.538 This is
especially considering the new and increased economic and social policy goals that the
Communications Commission of Kenya will have to attain in the era of convergence, and for the
attainment of a knowledge economy.539

534

See the case of Consumer Federation of Kenya v the Ministry of Information and Communication and 2 Others,
[2013] eKLR Petition No. 563 of 2012.The Court ordered for the postponement of the digital migration till after the
general elections, on the basis that the State had a duty to ensure that voters had access to broadcast news, which is
necessary in exercising their right to vote.
535
See generally, the regulatory framework under the Kenya Information and Communication Regulations, 2001.
536
See International Telecommunications Union (2011) Chairman’s Report: 11th Global Symposium for Regulators,
Armenia City, Colombia, 21st-23rd September 2011, op. cit.
537
William H. Melody (1997) “Designing a Working Telecom Regulatory Structure for 21 st Century Information
Societies,”op cit. This reactive regulatory stance is especially with regard to Quality of Service regulation, tariff
regulation, and universal access and service regulation.
538
See generally, Chapter 2.
539
Republic of Kenya (2007) Kenya Vision 2030: a globally competitive and prosperous Kenya, Government
Printer, Nairobi.

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3.3.1.8 Proactive regulation
In this regulatory model, the Communications Commission of Kenya would act as a catalyst for
facilitating the development of new applications and converged services across telecoms
networks.540 Telecoms infrastructure is becoming increasingly important in achieving critical
social and economic goals in society. Therefore, the Communications Commission of Kenya will
be required to view telecom issues in the broader context of information society development
policies and issues.541 After all, it is seized of a critical responsibility in attaining Vision 2030’s
goal of a knowledge economy.542
For example, Communications Commission of Kenya’s telecom development indicators and
targets would not be limited to traditional telecom sector objectives. 543 They would be extended
to applications and converged services in the financial, health, education and other sectors.544
Telecoms regulation would then take a more proactive role in the attainment of broader social
and economic goals of the Government of Kenya.545

For the Communications Commission of Kenya to promote innovation and increased
convergence of services within the ICT sector, and between the ICT and other sectors, it must
adopt a more broad-based and pro-active regulatory philosophy. Legislators and policymakers
should consider restructuring the Communications Commission of Kenya along the institutional
model of the UK’s telecom regulator. The OFCOM is structured as a central platform on which
converging issues, tools and styles of analysis can be integrated, and through which the activities
William H. Melody (1997) “Designing a Working Telecom Regulatory Structure for 21 st Century Information
Societies,”op. cit.
541
See the findings of the High Court in the case of Consumer Federation of Kenya v the Ministry of Information
and Communication and 2 Others [2013] eKLR Petition No. 563 of 2012. See also, Consumer Federation of Kenya
v the Attorney General and 4 Others, [2012] eKLR Petition No. 88 of 2011. In this case, the Court underscored the
central role of State organs in the realization of socio-economic rights under Article 43 of the Constitution of Kenya
2010.
542
Republic of Kenya (2008) National Information and Communications Technology Sector Master Plan 20082012, op.cit. See also, Republic of Kenya (2007) Kenya Vision 2030: A Globally Competitive and Prosperous
Kenya,op. cit..
543
Rufael Fassil (2009) Making ICT Work for Pro-Poor Development: a critical evaluation of initiatives in three
sub-saharan African countries, Books on Demand, Norderstedt, Germany. The author notes that there are two
internationally-agreed indicators for assessing the performance of the ICT sector in countries. These are telecom
revenue as a percentage of Gross Domestic Product (GDP) and telecom investment as a percentage of revenue.
544
United Nations Conference on Trade and Development (2008) Services and Development: implications for the
telecommunications, banking and tourism services sectors in Kenya, op. cit.
545
These include short and long-term development plans such as Kenya Vision 2030. See Republic of Kenya (2007)
“Kenya Vision 2030: a globally competitive and prosperous Kenya,” Government Printer, Nairobi.
540

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of key policy stakeholders can be coordinated.546 In addition, OFCOM maintains a close
engagement with industry, community and the academy on convergence issues.547

3.3.2 Communications Commission of Kenya’s Institutional Composition
The composition of the Communications Commission of Kenya’s board is critical to determining
the ability of the Commission to fulfill its role as a broad-based and proactive inter-sectoral
converged regulator, as described in section 3.3.1 above.548 The board composition should reflect
two key constituencies in the context of converged telecoms services. These are the various
sectoral regulators and policy makers, such as the Central Bank of Kenya and the National
treasury, and various stakeholders in the convergence process, including market players, civil
society, academia, and consumer groups.549

These include bodies such as Consumer Federation of Kenya (COFEK), the Telecommunications
Network Operators Forum (TNOF); the Kenya Telecom Network Operators (KTNO), and the
Telecommunications Service Providers Association of Kenya (TESPOK).

Composition of the Communications Commission of Kenya Board is guided by three main laws:
the Constitution of Kenya 2010; the Kenya Information and Communications Act, and the State
Corporations Act. I briefly examine them below.
3.3.2.1 The Constitution of Kenya 2010
Article 34(5)(b) of the Constitution of Kenya 2010 provides that the ICT regulator should be a
body that is independent of control of government and political and commercial interests. It
should also reflect the interests of all sections of the society. According to Ben Sihanya (2011),

546

This has assisted OFCOM in taking a strongly pro-active stance in relation to convergence. Its statutory activities
range over responsive investigation and enforcement, discourse-centric consultation ptogramme, design of
innovative and experimental policy instruments, and the design and evaluation of new rules, regulations and forms
of government engagement. See Constantijn Van Oranje, et al. (2008) “Responding to Convergence: different
approaches for telecoms regulators,” RAND Europe, Brussels, Belgium.
547
Ibid.
548
Article 34(5)(d) of the Constitution of Kenya 2010 requires the ICT regulator to reflect all sections of the society
in its composition. See also, Monica Kerrets (2004) “ICT Regulation and Policy at a Crossroads: a case study of the
licensing process in Kenya,”op. cit.
549
See Trusted Society of Human Rights Alliance v Attorney General and OtherNairobi Petition 229 of 2012
(Unreported).

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this and other sections of the constitution including Article 10, which provides for inclusiveness
and participation of the people, have signaled the shift of regulatory activity from ‘government’
to ‘governance’.550

The courts, for example, have entertained constitutional petitions questioning the breach of the
requirement of consultation and participation in the appointment of state officers. In the process,
the courts have emphasized the need for participation, consultation, consensus, accountability,
transparency and responsiveness in the process of governance.551
The issue of independence of the Commission has also been litigated in the High Court. 552 The
Media Council of Kenya and other civil society bodies, have also argued for absolute
independence of the regulator from the State. However, this argument is not supported by Article
34(5)(a) of the Constitution, which only prohibits control by government, rather than
representation of government. In addition, Article 34(5)(b) requires the regulator to reflect the
interests of all sections of society.

There is no doubt that the State is a major societal interest, and also has fundamentally strategic
national security and economic interests in the communications sector. Indeed, under Articles 1,
2, 10, and 73 of the Constitution, the State is the ultimate trustee and representative of public
interest. This debate therefore boils down to the balance and number of State and non-state
representatives in the governing board of the regulator, the Communications Commission of
Kenya. I explore this balance in detail below.
3.3.2.2 Kenya Information and Communications Act
Section 6(1) of the Act provides for the composition of the Board. It includes 5 public officers
designated by legislation, and seven other persons not being public officers, to be appointed by

Ben Sihanya (2011) “The Presidency and Public Authority in Kenya’s New Constitutional Order,”op. cit.
See the case of Anne Kinyua v Nyayo Tea Zone Development Corporation & 3 Others [2012] eKLR.
552
Kwacha Group of Companies & another v Tom Mshindi& 2 others , Civil Suit No. 319 of 2005, in the High
Court of Kenya at Nairobi, [2011] eKLR. However, the Court upheld the power of the State to limit the freedom of
speech.
550
551

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the Minister for Information and Communication. Ben Sihanya (2000) refers to this institutional
composition as the “college of regulators.”553

However, as discussed in Section 3.3.1.4 earlier above, the requirement of independence of
control from government is controversial, and has been litigated in Court.554 The Kenya
Information and Communications (Amendment) Bill, published in July 2013, attempts to resolve
the issue of government and political control by reducing the presence of state officers. It amends
section 6 of the Act to provide for only two state officers to sit on the Board. These are the
Principal Secretary in charge of Communication and the Principal Secretary in charge of the
National Treasury. The other nine members are the Chairman and Director-general of the Board,
and seven members who shall not be State officers.
3.3.2.3 State Corporations Act
Section 5 of the Act provides general guidelines for the composition of Boards of State
corporations. It mirrors the provisions of section 6(1) of the Kenya Information and
Communications Act, above.

How have the above constitutional and statutory frameworks reconfigured the Communications
Commission of Kenya as a converged regulator? I consider this question briefly below.
3.3.2.4 Representation of other sectoral regulators and policy makers in the CCK Board
The ability of the Communications Commission of Kenya to forecast on convergence processes
and impacts between the telecoms and other sectors depends on the representation of other
sectors in its Board.555 This is important for policy coherence between different sectors.556
Section 6 of Kenya Information and Communications Act provides for the membership of the
Information and Communication Principal Secretary, the Treasury Principal Secretary, and the

554
Kwacha Group of Companies & another v Tom Mshindi& 2 others , Civil Suit No. 319 of 2005, in the High Court
of Kenya at Nairobi, [2011] eKLR.
555
See generally, Monica Kerrets (2004) “ICT Regulation and Policy at a Crossroads: a case study of the licensing
process in Kenya,”op. cit.
556
Constantijn Van Oranje, et al (2008) “Responding to Convergence: different approaches for telecoms
regulators,”op. cit.
553

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Internal Security Principal Secretary, in the Board. These positions are currently held by Joseph
Musuni Tiampaty, Dr Kamau Thugge, and Mr. Mutea Iringo, respectively.557

Representation of the Ministry of Finance or the National Treasury, is critical, especially for the
development of regulatory policies for mobile financial services.558 However, for the benefit of
other forms of convergence between telecoms and other sectors such as health and education,
there is need for expansion of the membership of the Board. This could be done by way of
temporary memberships, by way of co-option, to specific Board Committees.559
3.3.2.5 Representation of other stakeholders in the convergence regulatory process
As discussed earlier, one of the significant roles of regulation of convergence is the standardsetting, information gathering, and behavior modification.560 These processes, however, cannot
be successfully undertaken by way of prescriptive rules. There is need for buy-in among the
convergence stakeholders.561 Therefore, linkages and engagements with convergence
stakeholders such as market players, civil society, the academia and consumer groups are critical.
They augment the ability of the Communications Commission of Kenya to play a pro-active role
in the convergence process.562

One of these linkages is by way of board representations in the Commission. This is, according
to Ben Sihanya (2000), is because many ICT regulatory boards in Africa, do not have sufficient
expertise.563 He argues that regulation is a complex and technical task that requires a
combination of disciplines. These include law, business, consumer interest, technology, political
557

Communications Commission of Kenya, 2013, Annual report financial year 2011/12, op. cit.
The National Treasury, and the Central Bank of Kenya, as the lead regulator of mobile financial services, have
led efforts to formulate financial laws and policies touching on mobile financial services. These include The
National Payments System Act, Cap. 39, the Proceeds of Crime and Anti-Money Laundering Act, and the
Regulations for the Provision of Electronic Retail Transfers.
559
Section 6(4) of the State Corporations Act grants the Minister the power to appoint alternate members, not being
members of the Board, to the Board.
560
See Institute of Economic Affairs (2003) “The Quest for an Information Society: benchmarking the regulatory
framework to usher Kenya into an information era,”Oop. Ccit. See also, Morgan Bronwen &Yeung Karen (2007)
Introduction to Law and Regulation, Oop. cit.
561
See Lishan Adam, Tina James and Alice Munyua Wanjira (2007) “Frequently Asked Questions about MultiStakeholder Partnerships in ICT for Development: a guide for national ICT policy animators,” the Association for
Progressive Communications (APC) South Africa.
562
Ibid.
563
558

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economy, and public policy.564 The CCK board, however, has an impressive representation of
expertise, as discussed below.

Section 6(1)(f) of the Kenya Information and Communications Act gives the Minister for
Information and Communication the power to appoint at least seven persons, not being public
officers, to the Board.565 The competencies to be met by such appointments include knowledge
or experience in matters related to law, postal services, broadcasting, radio communication,
information technology or computer science, telecommunications, and consumer protection
matters.566

While the current Board members indeed meet the professional qualifications outlined in statute,
it is not apparent whether the appointments mirror the need for stakeholder representation at the
Commission.567 For example, representation from the finance or banking sector would be
significant for the representation of financial sector views on the policies and regulations
touching on mobile financial services in Kenya.

Monica Kerrets (2004) laments the trend in the case of the Communications Commission of
Kenya, where majority of the senior management staff and the Board of Directors, is composed
of lawyers and engineers. She notes that “the ideological justification for this is seen to come
from the Government and public opinion.” This is to the extent that “legal and engineering
experts are assumed to make good regulators due to the technical and legal nature of
telecommunications.”
She counters this argument by asserting that “the nature of telecommunications has now come to
encompass information, communication and technology – and permeates all sectors of the

564

Ibid.
566
The competence of persons appointed to State organs is now a constitutional issue. Article 232(1)(g) provides for
merit and fair competition as the basis of appointments and promotions in the public service. See Community
Advocacy and Awareness Trust and Others v Attorney General Nairobi Petition No. 243 of 2011 (Unreported)
where the Court underscored Article 232(1)(g) as a benchmark for appointments to state organs. It held that
“Compliance with the objects of these provisions provide the legitimate purpose for the differentiation of various
applicants.”
567
565

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economy. Thus, future policy making processes would do well to establish well rounded teams,
from all domains of ICT as well as from other sectors of the economy.”568

There is need for telecoms regulators and policy makers to consider reforming the Kenya
Information and Communications Act to provide for a more inclusive telecoms regulator.

3.3.3 Regulatory Cooperation between the CCK and other Sectoral Regulators in Kenya
Convergence of mobile telecom and financial services in Kenya has launched the era of intersectoral convergence between telecoms and other sectors.569 This has resulted in regulatory
convergence, as the converged services fall within the jurisdictions of various regulators, such as
the Communications Commission of Kenya, the Central Bank of Kenya, the Competition
Authority, and other consumer protection authorities.

As discussed in Chapter 2, regulatory convergence, in the present state, has resulted in a number
of regulatory problems. These include regulatory overlap and conflict, regulatory inertia, and
regulatory arbitrage.570 The Central Bank of Kenya has taken the primary role in the regulation
of mobile financial services in Kenya.571 On the other hand, the Communications Commission of
Kenya has taken a passive role and stuck to its traditional role of regulating access to
communication services.572

Market players, including Safaricom, Airtel, Essar Telecom and Orange Telkom, have taken
advantage of the regulatory gaps to roll out their services. The success of mobile financial
services in Kenya has actually been attributed to the absence of many bureaucratic and
regulatory bottlenecks.573
Monica Kerrets (2004) “ICT Regulation and Policy at a Crossroads: a case study of the licensing process in
Kenya,”op. cit. Communications Commission of Kenya
569
See the discussion on the process of network, market and regulatory convergence in section 1.2 of Chapter 1.
570
See the discussion on regulatory problems occasioned by convergence, in Section 2.8 of Chapter 2.
571
Alliance for Financial Inclusion (2010) “Enabling mobile money transfer: The Central Bank of Kenya’s
treatment of M-Pesa,”Alliance for Financial Inclusion (2010) “Enabling mobile money transfer: The Central Bank
of Kenya’s treatment of M-Pesa,” op. cit.
572
International Telecommunications Union (2011) Chairman’s Report: 11th Global Symposium for Regulators, op.
cit.
573
United Nations Conference on Trade and Development (2012) “Mobile Money for Business Development in the
East African Community: a comparative study of existing platforms and regulations’, op. cit.
568

133


This regulatory context, however, does not provide a healthy regulatory environment for the
growth of investments and innovation in mobile financial services and other converged
services.574 There is need for policy coherence at all policy and regulatory levels touching on
mobile financial services and other converged services.575 The question that arises is where the
Communications Commission of Kenya falls in a coherent framework for policy and regulation
of mobile financial services. I discuss at least three proposed designs for a coherent regulatory
structure: multiple regulation, multi-utility regulation, and regulatory cooperation.
3.3.3.1 Multiple regulation
In this model of regulation, all mobile financial service regulators, including the
Communications Commission of Kenya, Central Bank of Kenya, the Competition Authority, and
any other fringe regulators, would independently exercise regulation over aspects of converged
services that fall within their jurisdiction.576For example, the Central Bank of Kenya will
continue to regulate the payment services offered by mobile network operators, while the
Communications Commission of Kenya would regulate access to communications services. 577

As discussed above, the extent of convergence in services has rendered this distinction between
regulating the service infrastructure, and regulating the service itself, untenable.578 For example,
one solution to the problems of convergence regulation would be to leave the competition and
consumer protection issues to be regulated by the general competition authorities and the
consumer regulation agencies. However, there has been extensive integration of mobile financial
services into voice communications services, through service bundling. The implication is that
regulation of mobile financial services by non-telecom regulators would result into their
interference with the regulatory mandate of telecoms regulators.
Martha Garcia-Murillo and Ian MacInnes (2002) “The impact of technological convergence on the regulation of
ICT industries,” op. cit. The author argues that regulatory arbitrage may not necessarily be the best option for
society or the industry as a whole.
575
Atul K. Shah, (1997) “Regulatory arbitrage through financial innovation,”op. cit. The author refers to regulatory
arbitrage as “creative compliance.” He notes that while creative compliance may not be illegal, it undermines the
spirit of regulation, and makes the regulatory framework appear weak and ineffective.
576
Jens C. Arnbak (2002) “Multi-utility regulation: yet another convergence,” in Networking Knowledge for
Information Societies: Institutions and Intervention, Robin Mansell, RohanSamarajiva& Amy Mahan (eds.) Delft
University Press, Delft, p. 144.
577
See the regulatory mandate of the Central Bank of Kenya under the National Payments System Act, and that of
the Communications Commission of Keya under Sections 5 and 83 of the Kenya Information and Communications
Act.
578
Communications Commission of Kenya (2008) Strategic Plan: 2008-2013, op. cit.
574

134


In addition, multiple regulations will increase the cost of multiple regulatory compliance and
undermine development and innovation of converged services such as mobile financial
services.579 This is because the increased risk and cost from multiple heterogeneous regulations
“will harm incentives for efficient infrastructure investment and service provisioning.”580
3.3.3.2 Multi-sector regulation
Generally, multi-sector regulation is understood to be “the functioning of a single regulatory
agency that has responsibility for sectors such as telecom, energy, water and transportation.”581
This model of regulation establishes a central regulatory authority with jurisdiction over multiple
sectors.582 A good example of a multi-sector regulator in Kenya is the Energy Regulatory
Commission, established under the Energy Act.583 It regulates various independent sectors within
the energy sector, including the electricity sector, the petroleum sector, and the renewable energy
sector.

There is a distinction between a multi-sector regulator and a multi-utility regulator. The
Communications Commission of Kenya is a converged multi-utility regulator, to the extent that
it regulates telecommunications, broadcasting, postal communications, information technology,
computing and other emergent services that fall within ICT sector.584 The advantages for this
model are that policy coherence over ICT convergence has been easily achieved, and regulatory
cost reduced. Indeed, the Communications Commission of Kenya can count its Universal
Licensing Framework as a milestone for multi-utility regulation.585
Nzomo Mutuku (2008) “Case for Consolidated Financial Sector Regulation in Kenya,”op. cit. Regulatory overlap
in any sector of the economy is not conducive for promoting innovation and investments because of the costs of
regulatory compliance, and fear of multiple penalties from multiple regulators. Currently, the financial services
sector in Kenya is governed by multiple Acts of Parliament: the Central Bank of Kenya Act (Cap. 491) the Banking
Act (Cap. 488) Capital Markets Act (Cap. 485A) the Retirements Benefits Act (No. 3 of 1997) and the Insurance
Act (Cap. 487). These statutes create the Central Bank of Kenya (Central Bank of Kenya) the Capital Markets Act
(CMA) the Retirements Benefits Authority (RBA) and the Insurance Regulatory Authority (IRA).
580
William Lehr and Kiessling Thomas (1999) “Telecommunication Regulation in the United States and Europe: the
case for centralized authority,” in Competition, Regulation and Convergence: Trends in Telecommunications Policy
Research, S. E. Gillett and I. Vogelsang (Eds.) (1999) Lawrence Erlbaum Associates, Mahwah, NJ.
581
Rohan Samarajiva and Anders Henten (2002) “Rationales for Convergence and Multi-sector Regulation,” World
Dialogue for Regulation of Network Economies (WDR) Lyngby.
582
A sector is “a set of closely related industries, which have a degree of substitution possibilities and, furthermore,
substantial complementarities.” See Frederick M. Scherer, and David Ross (1990) Industrial market structure and
economic performance, 3rd edition, Houghton Mifflin, Boston, pp. 73-79.
583
Energy Act, No. 12 of 2006, Laws of Kenya.
584
See generally, the Kenya Information and Communications Act, Cap. 411A, Laws of Kenya
585
579

135


Multi-sector regulation brings together various sectors under one regulator. This model of
regulation, however, portends many challenges, especially over mobile financial services. One of
the challenges is the complexities of regulating traditionally distinct but converged services such
as telecoms and financial services.586 If the Central Bank of Kenya were to be fashioned as a
central regulator for mobile financial services, can it efficiently regulate equipment typeapproval? Can it undertake other specialized regulatory roles of the Communications
Commission of Kenya?

On the other hand, if the Communications Commission of Kenya were to be designated the
central regulator for mobile financial services, can it efficiently ensure macro-economic and
micro-economic stability within the financial system? The answer would be negative.587

In addition, the distinct regulatory philosophies and cultures of regulation of each sector make a
central multi-utility and multi-sectoral regulator a hard sell.588 For example, the main regulatory
role of the Central Bank of Kenya is to ensure liquidity, solvency and proper functioning of a
stable, market-based financial system.589 On the other hand, Communications Commission of
Kenya’s mission statement is to regulate to ensure access to communications services.590

Both the CCK and the CBK, as multi-sector regulators, would also suffer certain problems
associated with multi-sector regulators. Ben Sihanya (2000), for example, argues that the CCK
would encounter three problems as an individual regulator.591 First, there is a likelihood of
regulatory capture, where the regulated sector has more information than the regulator, and
586

Jens Ambak, for example, argues against centralized regulation of mobile and financial services by pointing out
that “the fact that SIM cards of GSM mobile terminals are being upgraded to function simultaneously as credit or
debit cards does not necessarily justify a single regulatory authority for telecom and financial services.” See Jens C.
Arnbak (2002) “Multi-utility regulation: yet another convergence,” in Networking Knowledge for Information
Societies: Institutions and Intervention, Robin Mansell, Rohan Samarajiva & Amy Mahan (eds.) Delft University
Press, Delft, p. 144.
587
Ibid.
588
Jeremy Mitchell (1997) “Converging Communications, Fragmented Regulation and Consumer Needs,” in W.
Melody (ed.) Telecom Reform: Principles, Policies and Regulatory Practices, 441-450. Technical University of
Denmark, Lyngby.
589
Section 4(2) of the Central Bank of Kenya Act, Cap.491, Laws of Kenya.
590
Section 5(1) of the Kenya Information and Communications Act, Cap.411A. Laws of Kenya.
591

136


therefore determines the regulatory outcome.592 Regulatory capture can also occur as a result of
corrupt practices. Second institutional memory is compromised, since, not everything pertaining
to regulation goes into writing. Third multi-sector regulation compromises benefits of sharing
expertise and information, since utility regulation is a multi-disciplinary task.593

This therefore calls for another model of regulation that addresses the deficiencies of multiple
regulation and multi-sector regulation of converged telecoms services.
3.3.3.3 Regulatory cooperation
The inadequacies of multiple regulation and multi-sector regulation of inter-sectoral convergence
call for a new, overarching regulatory framework. This should be a framework that ensures a
competitive level playing field for industry players without strangling economic and
technological innovation.594

In the case of mobile financial services, for example, this can be achieved through a legal
framework that encompasses an inter-related regulatory approach which recognizes the
distinctive features of telecommunications and financial services requirements.595 In addition, the
regulatory framework should establish and institutionalize co-operation and information sharing
between the regulators. Cooperation and information-sharing is essential between the
telecommunications regulator, supervising the provision of value-added services by a mobile
network operator, and the banking regulator, supervising the deposit-taking business of the
mobile network operator.596 Ben Sihanya (2000) has referred to this model as a cocktail of
regulators.597

Regulatory cooperation between the Communications Commission of Kenya and other sectoral
regulators of the mobile financial services, and even other converged services, is therefore
592

Ibid.
Ibid.
594
Jeremy Mitchell (1997) “Converging Communications, Fragmented Regulation and Consumer Needs,”op. cit.
595
Rolf H. Weber (2010) “Regulatory framework for mobile financial services,” in Mobile applications of inclusive
growth and sustainable development, Telekom Regulatory Authority of India, New Delhi, India, pp. 87-93.
596
Ibid.
597
Millennium,”op. cit. According to the author, a “cocktail” occurs where various regulators have a mandate on the
same or related regulatory issues.
593

137


critical if it is to properly undertake its new telecoms regulation role. As discussed above, there is
need for a clear legal framework for this kind of cooperation between sectoral regulators and the
Communications Commission of Kenya. A plausible reason for the Commission’s passive role in
mobile financial services could be that the Central Bank of Kenya, by virtue of its functions,
commands more political weight than the Communications Commission of Kenya, in the
absence of legal guidelines.

Currently, there are no clear and elaborate legal or administrative provisions for cooperation
between the Communications Commission of Kenya and the Central Bank of Kenya or other
sectoral regulators. This has undermined the process of formulating an optimal regulatory
framework for mobile financial services, due to regulatory inertia. The Constitution of Kenya
2010, by virtue of Article 10, binds state organs such as regulators to consult, before undertaking
their regulatory functions.598 However, in absence of legal and administrative guidelines, state
agencies such as the Communications Commission of Kenya and the Central Bank of Kenya
have pursued parallel regulatory programmes.

This provision requires clarification by way of either statute or subsidiary legislation. Indeed,
this will require clear and elaborate mechanisms. This is because even where other constitutional
offices such as the Presidency and the defunct Office of the Prime Minister were required to
consult, there were interpretation conflicts regarding the extent of the process and nature of
consultation.599
Section 5(3) of the Kenya Information and Communications Act600 also provides that the
Communications Commission of Kenya may enter into associations with such other bodies or
organizations within or outside Kenya, as the Commission may consider desirable or appropriate,
598

Article 10 of the Constitution provides for national values and principles of governance that bind all state organs,
state officers, pubic officers and any person that applies or interprets the Constitution, enacts, applies or interprets
any law, or makes or implements any public policy decision. These values and principles of governance include
shareing and devolution of power, participation of the people, and inclusiveness.
599
The Constitutional and statutory requirement for consultation has been litigated numerously in the Kenyan courts,
and has become a significant requirement in the governance process. In Centre for Rights Education and Awareness
& 7 Others v. The Attorney General, Petition 16 of 2011, in the High Court at Nairobi, the Courts considered the
meaning of consultation, and observed that while neither the constitution nor statute provide benchmarks for
consultation, public institutions must be guided by the spirit of Article 10 of the Constitution.
600
Cap. 411A, Laws of Kenya

138


and in furtherance of its statutory purposes. Similarly, this section requires implementing
guidelines in the form of ministerial orders or regulations.

In a number of countries, telecoms regulators have answered to the need to cooperate with other
sectoral regulators in areas of concurrent jurisdiction by adopting memoranda of understanding
and cooperation protocols.601 For example, the Dutch Independent Telecommunications and
Post Regulator (OPTA) and the Dutch competition authority have “established a cooperation
protocol to provide clarity on how they will cooperate on matters of mutual interest.”602
Similarly, the Nigerian Communications Commission (NCC) and the Nigerian Consumer
Protection Council (CPC) have adopted a memorandum of understanding that “establishes how
the agencies will collaborate on matters related to consumer protection.”603

A good legal and institutional forum for establishing a framework for cooperation between the
Communications Commission of Kenya and other sectoral regulators such as the Central Bank of
Kenya would be under the State Corporations Act.604 Section 26 of the Act establishes the State
Corporations Advisory Committee. One of its functions under section 27 is to:
“examine proposals by state corporations to acquire interests in any business or to enter
into joint ventures with other bodies or persons or to undertake new business or otherwise
expand the scope of the activities and advise thereon.”
Hence the Committee would be an appropriate forum for coordinating the establishment of
cooperation protocols and memoranda of understanding between the Communications
Commission of Kenya and various State corporations. This would be important to avoid similar
administrative challenges, e.g. functional overlaps, occasioned by regulatory convergence. 605

International Telecommunications Union (2012) “Universal Access and Service,” in ICT Regulation Toolkit,
International Telecommunications Union, Geneva [online], available at www.ictregulationtoolkit.org (last accessed
on 8/8/12).
602
Ibid.
603
Ibid.
604
Cap. 446, Laws of Kenya
605
See section 2.8 in Chapter 2 for a discussion on the regulatory problems occasioned by convergence of mobile
and financial services.
601

139


3.3.4 Extent of State regulation, co-regulation and self-regulation in Kenya’s telecom
sector
One of the most important distinctions between innovative economic sectors such as the ICT
sector and other sectors is that innovation is essentially led by other players other than the
State.606 These players include the market, goods and service providers, consumers, and civil
society groups, among others. Indeed, the rapid development of the ICT sector in Kenya can be
credited to the liberalization of the ICT sector over the last 15 years. 607 The mainstreaming of
ICT into all socio-economic and political facets of society is evidenced by mobile financial
services, e-learning, and mobile applications such as e-health, e-agriculture, among
others.608This distinction has elicited an important global debate on regulation of ICT generally,
and telecoms, in particular. Is regulation a State-centric or a polycentric activity?609

There is emerging consensus on a number of related regulated issues in this debate. First,
regulation is not merely the action of the State in setting prescriptive rules backed by sanctions.
Regulation also entails the use of other non-state and non-rule-and-sanction based regulatory
tools and methods.610 These include regulatory incentives, market-based incentives, and other
tools and methods discussed more exhaustively further below.611 Second, the sphere of
regulation is not occupied only by the State, but by other non-state regulatory actors. It is
polycentric.612

This polycentric view of regulation has been reinforced by many authors who have written on
regulation of the information industry. Lawrence Lessig, for example, has captured this
composite view of regulation by suggesting four main regulatory tools or modalities, in general
terms, as law, social norms, markets and architecture.613 Ben Sihanya (2000) adapts Lessig’s
regulatory framework in his argument that for Africa to claim the 21st century, it should reMarc Bourreau & Pinar Dogan (2001) “Regulation and innovation in the telecommunications industry,”
Telecommunications Policy, Elsevier, Vol. 25(3) pages 167-184, April.
607
Gatana Kariuki (2009) “Growth and Improvement of Information Communication Technology in Kenya,”op. cit.
608
Jenny C. Aker and Isaac M. Mbiti (2010) “Mobile Phones and Economic Development in Africa,”op. cit.
609
Julia Black (2008) “Constructing and contesting legitimacy and accountability in polycentric regulatory
regimes,”Regulation and Governance, Volume 2, Issue 2, pp. 137–273.
610
Ibid.
611
Ibid.
612
Ibid.
613
Lawrence Lessig (1999) Code and Other Laws of Cyberspace, Basic Books, New York. See also, Lawrence
Lessig, (1998) “The New Chicago School,”Journal of Legal Studies, vol. XXVII (June 1998).
606

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examine four factors that are critical to a technology-led development strategy. These are the
architecture, market instruments, constitutional and letal principles, and social norms.614

In this proposed scheme, the regulators occupying the sphere of regulation are the State, the
society, the market players such as service providers and consumers, and infrastructure,
respectively.615 Joel Reidenberg, on the other hand, also proposed a slightly varied set of
regulatory modalities, as “a ‘complex mix’ of State, business, technical, and citizen mechanisms
for regulation.”616

The telecoms regulatory sphere in Kenya is indeed composed of actors such as the
Communications Commission of Kenya and other State actors, market players such as MNOs,
civil society organizations, and other fringe actors.617 However, as has been appreciated by
lawyers, economists and political scientists, State regulation remains the main regulatory actor in
telecoms regulation. Other regulatory players exercise their roles around the legal regulatory
framework of the State.618

Three main regulatory mechanisms are used to engage other players in the process of telecoms
regulation: state regulation, co-regulation and self-regulation.619 In order to effectively regulate
converged telecoms services such as mobile financial services, it is necessary to engage these
other regulatory players. They assist the regulator to evolve regulations that are timely and

Millennium,”op. cit. The author further argues that whether Africa claims the 21 st century largely depends on
whether Africa develops and harnesses the promise and opportunities presented by cyberspace, telecommunications
and information technology.
615
Ibid. See also, Morgan Bronwen &Yeung Karen (2007) Introduction to Law and Regulation,op. cit.
616
Joel Reidenberg (1997) ‘Governing networks and rule-making in cyberspace’, in B. Kahin and C. Nesson (eds.)
Borders in Cyberspace: Information Policy and the Global Information Infrastructure, The MIT Press, Cambridge,
MA. See also, Joel Reidenberg and Paul Schwartz (1998) Data Protection Law and On-line Services: regulatory
responses, (Eur. Comm. 1998) available athttp://europa.eu.int/comm/dg15/en/media/dataprot/studies/regul.pdf (last
accessed on July 15, 2012).
617
Lishan Adam, Tina James and Alice Munyua Wanjira (2007) “Frequently Asked Questions about MultiStakeholder Partnerships in ICT for Development: a guide for national ICT policy animators,”op. cit.
618
A Ogus, (1994) Regulation: Legal Form and Economic Theory, Clarendon Press, Oxford.
619
See Colin Scott (2002) “Private Regulation of the Public Sector: a neglected facet of contemporary governance”
29 Journal of Law and Society, pp. 56-76. See also, Julie Black (2001) ‘Decentering Regulation: understanding the
role of regulation and self-regulation in a ‘post-regulatory’ world’ 54 Current Legal Problems, pp. 103-46.
614

141


relevant to the evolving technological and converging sector.620 Below I briefly discuss the
extent to which state regulation, co-regulation and self-regulation have been used to regulate
mobile financial services.

3.3.4.1 State regulation in the Kenyan telecoms sector
This type of regulation is typified by the traditional prescriptive, sanction-based, command-andcontrol regulation by statutory agencies.621 The Communications Commission of Kenya, by
virtue of its status as a state corporation, embodies the model of state regulation.622 As discussed
earlier above, though, Article 34(5)(a) of the Constitution, requires that the information regulator
should be independent of control of Government. Media stakeholders such as the Media Council
of Kenya (MCK) have called for the re-establishment of the Communications Commission of
Kenya as an independent statutory commission rather than a state corporation.623

State regulation of the telecoms sector by the Communications Commission of Kenya is justified
by the need for risk aversion and economic planning in an increasingly complex and globalized
economy and society.624 This is especially necessary for sensitive services such as converged
mobile telecoms and financial services. In addition, the Communications Commission of Kenya
is better placed to push for certain regulations, and the compliance with those regulations, as they
may not be in the interest of other regulatory players, e.g. MNOs. These include competition
regulations, quality of service regulations, and other consumer-oriented regulations.

However, Article 10 of the Constitution of Kenya 2010 also provides certain standards for
inclusiveness and participation of the people in the regulatory process of the Communications

621
Ian Ayres and John Braithwaite (1992) Responsive Regulation: transcending the deregulation debate, Oxford
University Press, New York, p. 102.
622
Millennium,”op. cit. The author notes that this model assumes that the government is endowed with infinite wisdom,
and always seeks the public good.
623
Winfred Kagwe (2012) “Communications Commission of Kenya to be Replaced by New Independent Body,”op.
cit. However, an independent Commission, as long as it is established by an Act of Parliament, would still fall under
the definition of a State organ, as provided under Article 260 of the Constitution.
624
Mike Nxele and Thankom Arun (2005) “Regulatory Impact on the Development of the Telecommunications
Sector in East Africa: a case study of Kenya,”op. cit.
620

142


Commission of Kenya and other state organs.625 These principles require that the
Communications Commission of Kenya and any other regulators and policy makers in the
telecoms sector consult with sector stakeholders and other regulators in making regulations and
policies.
This is necessary for augmenting Communications Commission of Kenya’s regulatory capacity
with technical know-how, industry statistics, and other vital information that it may not have.
This practice has been reflected, for example, in the composition of the Prime Minister’s Task
Force on price wars in the mobile telecoms sector.626 The Task Force was composed of
representatives from the Prime Minister’s office, the CBK, the Communications Commission of
Kenya and also from the respective MNOs.627
3.3.4.2 Self-regulation within Kenya’s telecoms sector
As contrasted with State regulation, self-regulation entails the specification, administration and
enforcement of the regulations by the regulated bodies themselves.628 Self-regulation is common
in restricted professions such as the practice of medicine, Engineering, Law and other similar
disciplines. In Kenya, for example, the above professions are regulated by the Kenya Medical
Practitioners and Dentists Board, Engineers Board of Kenya, and the Law Society of Kenya,
respectively.629

In the ICT sector, some of the self-regulatory agencies include the Computer Society of Kenya
(CSK), the Information Technology Standards Association (ITSA), and the East Africa Internet
Association (EAIA).630 Public utility sectors such as the telecoms sector have been under state

625

See Centre for Rights Education and Awareness & 7 Others versus The Attorney General, Petition 16 of 2011, in
the High Court at Nairobi, [eKLR].
626
David Ochami (2011) “State Acts to Fix Mobile Phone Wars,” East African Standard, Thursday February 24,
2011, Nairobi.
627
Ibid.
628
Ian Ayres and John Braithwaite (1992) Responsive Regulation: transcending the deregulation debate, op. cit.
629
The above self-regulatory bodies are, however, set up by statute. These include the Law Society of Kenya Act,
and the Engineers Act, 2011.
630
Millennium,”op. cit. The author notes that these are membership organizations mainly consisting of professionals.
They have the characteristics of trade unions and have limited consumer participation.

143


regulation. However, in 2007, Parliament enacted the Media Act631, which established the Media
Council of Kenya to regulate the Media industry.

Nevertheless, the telecom sector has also organized itself into various market associations such
as the Kenya ICT Network (KICTANET), the Telecommunications Service Providers
Association of Kenya (TESPOK) and the Kenya Telecom Network Operators (KTNO), and the
Telecommunications Network Operator Forum (TNOF).632 These organizations, however, are
more of lobby groups than self-regulatory organizations.633 The telecoms sector therefore lacks a
self-regulatory regime.

Self-regulation is generally advantageous over state regulation because of a number of reasons.
First, industry knowledge and expertise is used more efficiently, especially in regulation of
technical issues.634 Second, regulations emanating from self-regulatory bodies are more flexible
and adaptable to rapid technological and other economic changes, compared to state-centric
regulations. In Kenya, for example, regulations made by the Communications Commission of
Kenya must be approved by parliamentary committees such as the Committee on Energy,
Communication and Information, and the Committee on Delegated Legislation.635

Third, self-regulation lowers the regulatory burden on business, compared to the costs of State
regulation, which many times involve revenue-focused fees and levies.636 Reciprocally, the cost

631

Act No. 3 of 2007, Laws of Kenya.
633
634
However, this is not always the result in establishing self-regulation. In the media industry in Kenya, for
example, the media has been accused of “lacking the will, intellectual leadership and capacity to address the
diversity of legal, policy and regulatory challenges facing them. Their desultory handling of media laws and
regulation is indicative of its lack of commitment to address critical issues facing the sector radically and speedily.”
See Peter Oriare, Rosemary Okello-Orlale, Wilson Ugangu (2008) “The Media We Want: the Kenya media
vulnerabilities study,” Friedrich Ebert Stiftung, Nairobi.
635
Section 34(1) of the Interpretations and General Provisions Act, Cap.2, Laws of Kenya.
636
The World Bank (2012) Doing Business 2012: Kenya, World Bank, Washington. The burden of regulatory
compliance for Kenyan companies is particularly heavy, for example, in tax compliance. Globally, Kenya stands at
166 in the ranking of 183 economies on the ease of paying taxes. On average, Kenyan firms make 41 tax payments a
year, spend 393 hours a year filing, preparing and paying taxes and pay total taxes amounting to 33.1% of profit.
632

144


of state regulation is also lowered to entertain appeals from the self-regulatory bodies.637 Lastly,
self-regulation allows the market to work better, in absence of the disruptive interference of the
State.

For the above reasons, self-regulation would provide a good regulatory environment for
innovation-led and rapidly-changing sectors such as the converged telecoms sector. This is
especially with regard to the increased speed of promulgation of sector regulations for new
business and technological innovations such as mobile financial services.638

However, as discussed earlier above, self- regulation may not be a suitable regulatory scheme for
services such as mobile financial services. This is because of the inherent risks of financial and
other improprieties that may be perpetrated by the mobile network operators.639 Therefore, there
is need for a balanced approach between state regulation and self-regulation, so as to achieve the
benefits of both frameworks. This is discussed below.
3.3.4.3 Co-regulation by the State and market players in the telecoms sector in Kenya
Because of the advantages and inherent inadequacies in both state regulation and self-regulation,
there is need for a balanced approach that can harness the benefits of both frameworks, to
promote innovation and development of converged services. This is known as co-regulation. The
most common definition of co-regulation is that it involves self-regulation with a statutory
element, or with the oversight of a public authority.640 Co-regulation can take either of the
following three forms.

First, cooperation between state authorities, e.g. the Communications Commission of Kenya,
with the industry, such as the Kenya Telecoms Network Operators (KTNO), and the

See generally, Connie Ngondi Houghton (2006) “Access to Justice and the Rule of law in Kenya,” paper
prepared for the High Level Commission on Legal Empowerment of the Poor, Nairobi.
638
Currently, there are no telecoms regulations specific to mobile financial services. Aside from the provisions of
Section 83C of the Kenya Information and Communications Act, which touch on electronic transactions, the
Communications Commission of Kenya does not exercise a direct regulatory role.
639
USAID and Kenya School of Monetary Studies (2010) “Mobile Financial Services Risk Matrix,”op. cit.
640
Ian Bartle and Peter Vass (2005) “Self-Regulation and the Regulatory State: a survey of policy and practice,”
Research Report 17, Centre for the Study of Regulated Industries, University of Bath School of Business, Bath.
637

145


Telecommunications Service Providers of Kenya (TESPOK), on regulatory matters; 641 Second,
delegation of a public authority’s regulatory powers to an industry or professional body; Third,
review, approval and endorsement of self-regulatory schemes developed by industry
associations, without necessarily being established by statute.642

The advantage of co-regulation is that it combines the advantages of state regulation and selfregulation, in a bid to create an optimal regulatory framework for telecoms convergence. 643 The
Kenya Information and Communications Act does not have a framework for co-regulation. It
preserves the state regulatory orientation.

The input of market players in the regulatory process is critical to maintaining regulatory
processes at the age of innovation.644 While the Government has strategic goals and objectives
that must be safeguarded by State regulation, it requires the input of market players in the
regulatory process.645 There is therefore need for regulatory reform to incorporate regulatory
cooperation in the telecoms sector.646

641

The Ministry of Information and Communication and the Communications Commission of Kenya, for example,
have encouraged an inclusive and consultative process in the drafting of the Independent Communications
Commission of Kenya Bill, 2010. See Winfred Kagwe (2012) “Communications Commission of Kenya to be
Replaced by New Independent Body,” The Star, Tuesday 9 th October 2012, Nairobi.
642
For example, self-regulation of the capital markets with statutory approval has been established under Section
18B of the Capital Markets Act Cap. 485A, Laws of Kenya. This section allows industry players intending to
operate as self-regulatory schemes to apply to the Capital Markets Authority for recognition. Consequently, the
Nairobi Securities Exchange has fashioned itself as a self-regulatory organization. See Jacob K. Gakeri (2011)
“Enhancing Securities Markets in Sub-Saharan Africa: an overview of the legal and institutional arrangements in
Kenya,”International Journal of Humanities and Social Science, Vol. 1, No. 9, Special Issue July 2011. The author
notes that self-regulation in the capital markets has served the market well, but failed in the area of enforcement of
rules.
643
Ian Bartle and Peter Vass (2005) “Self-Regulation and the Regulatory State: a survey of policy and practice,”op.
cit.
644
645
Ibid.
646
Ibid.

146


3.3.5 Use of principle-based versus rule-based regulations by Kenyan telecom regulators
As mentioned above, the challenge of regulating rapidly-changing technologies and business
environments is that regulations are not promulgated as fast as the introduction of technological
and business innovations.647 Hence, where innovative and unregulated services such as
converged mobile financial services are introduced in the market, regulations may stifle
innovation and investments.648 This is because market entry may be barred by the unavailability
of regulations providing for licensing and authorization of these new services and business
models.649

Indeed, in the case of mobile financial services in developing countries, telecoms and financial
regulators have been reluctant to replicate the successful M-Pesa in their countries due to
absence of a regulatory framework.650 In Kenya’s case, Safaricom was lucky to have
successfully lobbied the Central Bank of Kenya and the Communications Commission of Kenya
to grant conditional authorization, while the regulators monitored the new service.651

It is in this context that the extent of detail in the regulations governing mobile financial services
and other similar converged services is crucial to the promotion of innovation and investment in
telecoms. The most common framework of regulation in this context is principle-based
regulation versus rule-based regulations.652 Which of these two frameworks are conducive to the
development of mobile financial services and other converged services? I briefly consider each
framework below. This is by no means exhaustive of the analytical frameworks of regulation of
convergence in ICTs.

647

Ibid.
James Prieger (2000) “Regulation, Innovation, and the Introduction of New Telecommunications Services,”
Working Papers 00-8, University of California at Davis, Department of Economics.
649
Ibid.
650
United Nations Conference on Trade and Development (2012) Mobile Money for Business Development in the
East African Community: a comparative study of existing platforms and regulations, op. cit.
651
Alliance for Financial Inclusion. (2010) “Enabling Mobile Money Transfer: The Central Bank of Kenya’s
Treatment of M-Pesa.” op. cit.
652
principles and rules within the ex ante vs. ex post debate” Canadian Business Law Journal, Vol. 47, pp. 329-362,
2009.
648

147


3.3.5.1 Rule-based regulation of telecoms in Kenya
Rule-based regulation is more commonly known as ex ante regulation, whereby the law states, in
advance, a detailed and particular rule that a company must obey.653 Certainty of rule-based or ex
ante regulation in telecommunications is necessary for building competitive markets and risk
management.654 For example, where health, safety or economic harms are likely to occur,
regulators prefer to make detailed, prescriptive rules.655

Examples of rule-based regulations under Kenyan telecoms laws include the communications
equipment regulations656, which prescribe a detailed framework for authorization of use of
communications equipment in Kenya. Other rule-based regulations include spectrum use
regulations,657 which regulates the allocation and use of spectrum in Kenya. The regulations are
detailed and restrictive to the extent that, for example, spectrum trading is not allowed. The
telecoms competition regulations658 are also rule-based to the extent that, for example, they
provide numerical thresholds and parameters for defining Significant Market Players (SMPs).

Rule-based regulations more consistently regulate simple phenomena, and become less adequate
the more telecoms markets evolve and converge with sectoral and non-sectoral services such as
mobile financial services.659 For example, equipment type regulations in Kenya have been
criticized by Ben Sihanya (2000) for “being too superficial and for fossilizing technological
development.”660 Indeed, as discussed in Chapter 2, the traditional regulatory framework of
telecoms – authorization, competition, interconnection and interoperability, universal service and
access, and quality of service – have failed to anticipate emergent converged services across

653

John Buckley (2003) Telecommunications Regulation, op. cit.
Ibid.
655
principles and rules within the ex ante vs. ex post debate” op. cit.
656
Kenya Information and Communications Act (Importation, Type Approval and Distribution of Communications
Equipment) Regulations, 2010.
657
Kenya Information and Communications Act (Radio Communications and Frequency Spectrum) Regulations,
2010.
658
Kenya Information and Communications Act (Fair Competition and Equality of Treatment) Regulations, 2010.
659
John Braithwaite (2002) “Rules and Principles: a theory of legislative certainty,”Australian Journal of Legal
PhilosophyVolume 27 (2002) 47, at p. 60. Braithwaite, however, acknowledges that consistency in complex
domains can be better realized by an appropriate mix of rules and principles than by principles alone.
660
Millennium,”op. cit. The author gives the example of the defunct Kenya Posts and Telecommunications
Corporation’s (KP&TC) insistence on the analog telephone handset.
654

148


sectors. This is because the rule-based regulations are not detailed enough to foresee future
telecoms developments.661

These inadequacies of rule-based regulation have led to the increasing need for more flexible
telecoms regulatory frameworks – principle-based regulations. These are discussed below.
3.3.5.2 Principle-based regulation
These are regulations that are “high-level, broadly stated rules or principles that set the standards
by which regulated firms must conduct business.”662 In contrast to rules, “as the regulated
phenomena become more complex, principles deliver more consistency than rules.”663 Principlebased regulations are related to ex post regulations, which contain general principles, and leave
to the regulators and the courts to determine, after the event, whether a breach of the regulations
has occurred.664
This framework of regulation is advocated “in situations where technological and market change
can quickly overtake any short-term prescriptive rules.”665 For example, the definition of
telecommunications service, and the role of the Communications Commission of Kenya under
the Kenya Information and Communications Act have become problematic with the convergence
of mobile telecoms and financial services.666

As discussed earlier above, the Communications Commission of Kenya interprets its role as
facilitating access to communications services, which services do not factor in value added
services such as mobile financial services.667 Hence the regulator has been reluctant to exercise
regulatory jurisdiction over mobile financial services.668

661

Ibid.
Julia Black (2007) Making a Success of Principles-based Regulation, op. cit.
663
John Braithwaite (2002) “Rules and Principles: a theory of legislative certainty,”op. cit.
664
John Buckley (2003) Telecommunications Regulation, op. cit.
665
principles and rules within the ex ante vs. ex post debate” op. cit.
666
See section 5 of the Kenya Information and Communications Act, and also the definitions of the terms
‘communication’ and ‘value-added services’ under section 2 of the Kenya Communications Regulations, 2001.
667
International Telecommunications Union (2011) Chairman’s Report: 11 th Global Symposium for Regulators,
Armenia City, Colombia, 21st-23rd September 2011, op. cit.
668
Alliance for Financial Inclusion (2010) “Enabling mobile money transfer: The Central Bank of Kenya’s
treatment of M-Pesa,” op. cit.
662

149

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